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Poloniex: Canada’s Securities Commissions To Enforce Oversight Functions Sooner

Based on the Ontario Securities Commission’s (OSC) actions against Poloniex, it is highly likely that the OSC will be initiating new oversight regulations for digital currency exchanges in the country. As a result, the Canadian securities administrators (CSA) have warned exchanges that there would be possible changes to crypto governance across the nation.

CSA’s New Regulatory Oversight for Crypto Exchanges

The OSC, provincial securities authorities, and territorial securities authorities form the CSA, which provides statutory oversight for the Toronto stock exchange. However, the OSC is the largest of these CSA bodies. Canadian and us authorities’ perspective of decentralized crypto-assets is the same. Both of them consider these digital assets as commodities and not securities.

But part of OSC’s actions, Poloniex indicates that exchanges that manage customer’s digital assets will be treated under the law governing securities regulations. Part of the circular read thus: “the Poloniex platform does not allow investors to possess or control their virtual assets. They have no understanding of the trades or deposits with their accounts; they only see their balance on their Poloniex account. When an investor requests to withdraw, they will possess their crypto assets as indicated on their Poloniex account; But even the withdrawal is subject to Poloniex’s approval. Thus, even though Poloniex claims to help its investors with trading their crypto assets, in reality, the company only offers its investors crypto-related contracts or instruments – both of which are securities and derivatives.”

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More Light On the Poloniex Issue

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During a very recent virtual summit, Grant Vingoe, OSC’s chairman and CEO, provided an update on the Poloniex situation. According to Vingoe, “essentially, the investor only has access to a ledger entry. So the profits (or loss) they’ll earn depends solely on the platform’s credibility and its strong desire to deliver.”

He further said, “on this basis, bitcoin or ether isn’t the security here. True security is the sum of various contractual rights, especially the client’s understanding of the platform and the platform’s readiness to deliver based on the contractual agreements. That’s what this security entails. Based on this understanding, the investor’s right is for the platform to give them a commodity in the form of a derivative or security.”

This was the OSC’s understanding that made it notify crypto exchanges of the need to operate along the standards set by the commission, with a deadline of April 19 given to these crypto exchanges. Sadly, Poloniex didn’t comply with these OSC directives.

Non-Compliance From Crypto Exchanges

A spokesperson from the OSC revealed that 70 exchanges reached out to the commission when the crypto exchanges were notified. Still, in the end, only WealthSimple crypto exchange was able to meet up with the CSA’s regulations.

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While the OSC may not institute any legal action against all erring exchanges, some exchanges will likely close shop. Christine Duhaime, a lawyer, told a media briefing that CSA had to force Poloniex out of the country after failing to heed repeated correspondences.

As of this writing, Poloniex couldn’t be reached for its opinion on the matter.


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Shelly Melancon (Switzerland)

Shelly is a cryptocurrency enthusiast from Switzerland, she bought her first crypto in 2015 when it was way less popular then it is today and since 2017 she has been writing about cryptocurrency for online news portals. Shelly is the newest addition to the Tokenhell team, she writes mostly news and reviews related articles , stay tuned to her posts to stay up to date with the crypto world.

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